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A Joint Framework for Category Purchase and Consumption Behavior

Author

Listed:
  • Rutger van Oest

    () (Tilburg University)

  • Richard Paap

    () (Faculty of Economics, Erasmus University Rotterdam)

  • Philip Hans Franses

    () (Faculty of Economics, Erasmus University Rotterdam)

Abstract

We propose a consistent utility-based framework to jointly explain a household's decisions on purchase incidence, brand choice and purchase quantity. The approach differs from other approaches, currently available in the literature, as it is able to take into account consumption dynamics. In the model, households derive utility from consumption, and they relate their purchase behavior to consumption planning. We illustrate our model for yogurt purchases, and show that our model yields important additional insights. One such insight is that the reservation price of households is not fixed, but depends on the available inventory stock. Furthermore, we find that promotionalactivities increase sales through more purchases in the product category and brand switching, but the effect through larger purchase quantities is limited.

Suggested Citation

  • Rutger van Oest & Richard Paap & Philip Hans Franses, 2002. "A Joint Framework for Category Purchase and Consumption Behavior," Tinbergen Institute Discussion Papers 02-124/4, Tinbergen Institute.
  • Handle: RePEc:tin:wpaper:20020124
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    File URL: https://papers.tinbergen.nl/02124.pdf
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    References listed on IDEAS

    as
    1. Randolph E. Bucklin & James M. Lattin, 1991. "A Two-State Model of Purchase Incidence and Brand Choice," Marketing Science, INFORMS, vol. 10(1), pages 24-39.
    2. Jeongwen Chiang, 1991. "A Simultaneous Approach to the Whether, What and How Much to Buy Questions," Marketing Science, INFORMS, vol. 10(4), pages 297-315.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    purchase incidence; brand choice; purchase quantity; consumption;

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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